The United Arab Emirates has agreed to extend $2 billion in loans to Pakistan for only one month, charging an interest rate of 6.5%. This shows that Pakistan is still relying heavily on short-term foreign loans to keep its foreign exchange reserves stable.
Reports say the UAE rolled over two separate loans of $1 billion each, which were due to mature on January 16 and January 22. Instead of giving a long-term extension, the UAE allowed a short rollover so both sides could continue talks about how long the loans should be extended and at what interest rate.
Pakistan is requesting a two-year extension and wants the interest rate reduced to around 3%. The government hopes this will reduce pressure on the country’s finances and make it easier to manage external payments.
In previous years, Pakistan usually received year-long extensions on such loans. Officials say the much shorter one-month rollover this time suggests that negotiations are still ongoing and not yet finalized.
Authorities expect more clarity on the final loan terms soon, as discussions between Pakistan and the UAE continue.
